tax systems

Why a sugar tax would break our tax system

A business think tank doesn’t like the idea of politicians effin’ around the edges:

It is very, very easy to break a beautiful tax system. Here is the recipe for doing it.

Start by finding some product that seems a little frivolous ? a bit of a luxury ? and preferably one that’s mostly used by people that the typical voter does not really like anyway. Say, for example, the fancy beard oil used by hipsters to maintain their elegant facial appendages.

Then, find some cause that nobody could object to. Something really motherhood and feijoa pie. Tieke recovery. Who doesn’t love the New Zealand saddleback and support its recovery? Nobody.

Add the two together and propose a tax on hipster beard oil to help fund Tieke recovery programmes. Who could object? Hipsters are at best a mild nuisance, and at worst a looming threat to national identity; beard oil seems the height of frivolous consumption; and Tieke are a perennial entry in Bird of the Year competitions.

The bundle is an economic abomination. If Tieke recovery is the best use of the next public dollar, it is best regardless of whether we tax hipsters’ beard oil. And if a tax on hipsters’ beard oil is the most efficient next tax to impose, then the government should tax it regardless of whether the money raised is used to cut other taxes, fund Tieke recovery, or fund something else entirely.

But none of that much matters. Treasury would scream, because economists know that these kinds of taxes are abominations. But Labour dismissed Treasury critiques as ideological burps, and National’s Gerry Brownlee has been no less dismissive of sound Treasury analysis. Politics rules in the end.

One of the dangers of political pressure is that it makes for bad solutions. ? Read more »

NZ has the 2nd best tax system in the world

Not sure from which perspective it is the best, but it is nice to know we have a system that’s relatively simple and doesn’t cost much to run – relatively speaking

New Zealand should do more to promote its tax system after an international survey ranked it as the second most competitive in the developed world, a tax expert says.

The international tax competitiveness index, compiled by a United States think tank, the Tax Foundation, compares the competitiveness of the tax systems in 34 countries.

The index rates New Zealand highly thanks to its “relatively flat, low income tax”, a “well-structured property tax”, no capital gains tax and a “broad-based value-added tax” (GST).

Oh deary me… so if Labour and the Greens had a go at stuffing around with GST and CGT, we would definitely not have come in the top ten. ? Read more »

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Labour out of policies – now running for the 2017 election

in-your-money

The lovely Andrea Vance lets us in on the detail

Workers with two or more jobs will pay less tax as they earn, under Labour’s plans to scrap secondary tax.

In the current system, those with more than one job often pay a higher rate on their secondary income.? It is expected they claim a refund on the wash-up at the end of the financial year.

However, Labour says this is too complex, overpayments are often not claimed back and the system hits hardest those in casual work.

Within five years of taking office Labour would develop an alternative to secondary tax. In the interim, it would implement special tax codes until an Inland Revenue computer upgrade comes online.

Within five years. ?That means having to elect a Green/Labour coalition twice in a row. ? That means it isn’t even a policy they intend to implement next term.

This is ?getting extremely?silly now. Read more »

In business? Hate provisional tax? Vote National

todd-mcclay-says-he-serves-rotorua-community

I, like many others, hate provisional?tax. ?It’s annoying, it frequently wants money from you before you have actually received it from your customers, and there is a big stick that if you guess too low, they’ll come beat you up a bit. ?Great reward for managing your business into growth.

Tom Pullar-Strecker reports on some changes that appear to be welcome at first glance

The much-hated provisional tax system that forces small businesses to forecast their tax liability a year in advance will be overhauled, Revenue Minister Todd McClay has all but confirmed.

McClay said he did not believe the provisional tax system was “fit for purpose”.

A “business transformation” programme under way at Inland Revenue, which the department expects to cost up to $1.5 billion, could allow firms to pay tax on their income in, or closer to, real time, he said.

It would be “wonderful” if Inland Revenue could get to a point when income was taxed only when it was earned, but any changes would need to be balanced against the Government’s needs, he said.

If provisional tax was linked to being paid, more like GST, then that could be less of a burden. ?End of the month, tote up your total payments, cough up x percent. ? Read more »

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